Over the last few decades electronic and physical transactions have increasingly involved the use of physical credit cards and the details of physical credit cards. More recently, transactions have moved towards the use of a digital or virtual wallet.
A digital wallet is typically an app on a smartphone in which a user retains information about their payment vehicle such as credit cards and bank accounts. The electronic wallet is activated when making a transaction and an appropriate payment vehicle is selected from the wallet to provide funds for the transaction.
Payment vehicle credentials, such as credit card number and expiry date, are sent from the electronic wallet to a merchant and from the merchant to a payment gateway through which the transaction is effected. The payment gateway sends the payment vehicle credentials to the electronic platform for association with the transaction. Once the owner of the digital wallet approves the transaction, checkout credentials (including the amount of the transaction, the payment vehicle credentials and so forth) are sent back to the payment gateway, from there to a merchant acquirer (i.e. a bank) and onward for further processing and subsequent settlement.
Despite security measures being in place for regulating online transactions and the platforms on which they can be made, the significant number of merchants and even larger number of transactions means that data is sometimes intercepted. Since that data includes payment vehicle credentials, funds can be stolen or misappropriated during online transactions.
There are also problems faced by some merchants. Where the electronic platform is a smartphone, a merchant often requires an app in order to enable transactions. The development of an app, its servicing and maintenance can be costly and is an unjustifiable expense for some merchants. Moreover, the merchant must then afford the setup and management of online credit and debit card transactions. Moreover, the merchant must then setup a merchant account with a bank or card association in order to support electronic, card-based transactions by consumers.
In addition, when settling an electronic transaction the merchant acquirer receives funds, transfer those funds to the payment gateway and the payment gateway delivers the funds (minus a fee) to the merchant. This multi-handling of settlement funds necessarily takes time to pass through the systems of the merchant acquirer and payment gateway, and deprives the merchant of access to those funds for longer than may be necessary.
It would be useful, therefore, to provide a method of effecting an electronic transaction with improved security for payment vehicle credentials, that enables all merchants to take advantage of app-based purchases, or that reduces the amount of handling of settlement funds before they are delivered to the merchant.